Record $2.25-billion fine recommended in San Bruno explosion

A massive fire roars through a mostly residential neighborhood in San Bruno following a 2010 pipeline explosion that killed 8 people.

A massive fire roars through a mostly residential neighborhood in San Bruno following a 2010 pipeline explosion that killed 8 people. (Paul Sakuma / Associated Press)

Kate Mather

A division of the California Public Utilities Commission recommended Monday that the agency levy a $2.25-billion penalty against Pacific Gas and Electric Company for the deadly 2010 explosion in San Bruno.

If approved, Commission officials said, the fine would be the largest ever imposed by a state regulatory agency and far beyond the previous record-setter for the agency -- a $38-million fine against PG&E for a 2008 natural gas explosion in Rancho Cordova.

The September 2010 blast left eight people dead, dozens injured and more than 30 homes destroyed after a 54-year-old gas pipeline exploded underneath the suburb south of San Francisco.

A month later, the National Transportation Safety Board determined that maintenance work at a pipeline control center triggered electrical problems and a rise in gas pressure prior to the blast.

The agency later issued a scathing report blaming PG&E for "baffling" mistakes, a "litany of failures,” and lax oversight, saying it took the gas company nearly 95 minutes to shut off the gas spewing from the broken pipeline.

The report by the commision's Safety and Enforcement Division said its investigators found more than 100 violations by the company, some dating back decades.

"Imposing a fine for each violation for each ongoing day would result in tens of billions of dollars of fines, which is more than PG&E's net worth," the report said.

"Consequently, CPSD recognizes that there is a limit on how much PG&E can afford to pay, because PG&E needs to retain its creditworthiness in order to be able to pay for its improvements in the safety of its facilities, as well as to procure natural gas and electric power."

Commission officials said PG&E shareholders, not ratepayers, should foot the bill, which would go toward safety enhancements and include money the gas company has already spent on improvements.

"I am recommending the highest penalty possibly against PG&E, without compromising safety and I want every penny of it to go toward making PG&E's system safer," Jack Hagan, director of the Safety and Enforcement Division, said in a statement.

Other bodies also proposed fines Monday, including the city of San Bruno and The Utility Reform Network, an advocacy group.

San Bruno officials said earlier Monday that PG&E shareholders should pay no less than $1.25 billion in fines and at least $1 billion toward improvements, the Associated Press reported. The Utility Reform Network said it urged $1 billion to fix pipelines and $720 million in fines and other penalties.

The gas company will file its own proposal later this month, a PG&E spokeswoman confirmed. A final decision from the commission is expected this summer.

In a statement, PG&E Chairman and Chief Executive Tony Earley said although he understood "the desire to punish PG&E," the proposed penalties "far exceed anything that I have seen in my 30 years in the industry and fail to appropriately account for the actions taken by the company."

The gas company pointed out steps it has taken to improve safety -- including strength-testing, digitizing records, replacing 45 miles of pipeline and automating valves -- along with other work scheduled for this year.

"I am deeply concerned than an excessive penalty, such as those proposed, could dramatically set back our efforts to do the right thing by making it harder and more costly to finance the remaining improvements that are needed in our gas system," Earley said.